Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Housing Affordability

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There was just the one reported sale at $500,000 or less at Sydney on the long weekend.
It was a $500,000 sale in Strathfield South.
The 11/1-3 Therry Street offering (below) was sold pre-auction through Richard Baini at Richard Matthews Real Estate.
<img src="https://i3.au.reastatic.net/800x600/a10ff8779a9175f208c880ff10c7d967548d421c8028b8afd6f044c17f420438/main.jpg" alt="11/1-3 Therry Street, Strathfield South" title="11/1-3 Therry Street, Strathfield South" data-index="0">
It was a 69 sq m two bedroom apartment in a 1966 block of 11.
It last sold at $243,000 in 2007, so doubled in price over the eight year period.
The most affordable property reported sold at the weekend on the outskirts of Sydney was a two-bedroom 72 sqm, 1980 built, strata home at 4/40-42 Ocean View Road, Gorokan, sold for $300,000 by Raine and Horne Charmhaven.
It didn't double in the past 13 years pricewise, having last traded at $160,000 in 2002.
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jchancellor-FAypfDUnLy

Sydney's cheapest at $500,000 in Strathfield South amid long weekend auction offerings

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There were just the 44 Victorian auctions reported to the REIV on the AFL grand final weekend, with 28 selling. 
Sales ranged between $300,000 at Sunbury to $1.96 million at Mount Waverley.
The cheapest at Sunbury, was a two bedroom house (below) last sold at $274,500 in April 2013.
Its sale price reflected 3.6% annual price growth over the two plus years. The REIV had regional Victoria annual growth at 6.3% almost double over the year to June.
The Barry Plant agency was giving $285,000 to $315,000 price guidance. 
The house had been up for rent at $290 a week recently, reflecting a 5% gross rental yield, slightly down on the $300 weekly asking rent in 2013.
 
<img src="https://i3.au.reastatic.net/800x600/c4b4d58137c24a88d2058138e89a09d6b02556b1a531d61a7ccd2969e3dd90f3/main.jpg" alt="303 Gap Road, Sunbury" title="303 Gap Road, Sunbury" data-index="0"> 
The Mount Waverley top weekend seller was a new house offering, with the nearby three-bedroom home at 52 Lechte Road, Mount Waverley sold for $1,600,000 by Fletchers as second highest price.
Despite the local sporting attraction, it was a weekend when the Chinese were out happy to snap up property. Like all things golden, the Golden Week holiday in China – in the first week of October – is considered a lucky time to buy a property.
This wasn't to deny September didn't see strong sale with a host of top prices paid across Mount Waverley.
A four-bedroom house on 4097-square-metre at 35-37 Regent Street sold at an undisclosed $6 million plus price record for the City of Monash.
The property had passed in at $5.55 million and sold to a developer soon after the auction.
A new townhouse price record for Monash was registered when a newly-built four-bedroom townhouse at 5A Billing Street sold privately for $2.45 million. <a href="https://www.realestateview.com.au/Real-Estate/5b-billing-street-mount-waverley/Property-Details-buy-residential-9428938" target="_blank">The mirror image next door 5B </a>has been scheduled for October 17 Jellis Craig auction.
The second most affordable property reported sold at the weekend was a four-bedroom home at 74 Ballan Road, Werribee sold for $325,000 by LJ Hooker Werribee.
The REIV advised top three auction sales suburbs in the month of September were Reservoir (55 sales), South Yarra (46 sales) and Richmond (42 sales).
TOP 5 HOUSES
 1. 6 Pinewood Drive, Mount Waverley $1,960,000 2. 52 Lechte Road, Mount Waverley $1,600,000 3. 200 Manningham Road, Bulleen $1,280,000 4. 33 Bowen Road, Doncaster East $1,035,000 5. 2 Calrossie Road, Blackburn South $960,000
 TOP 5 BARGAIN HOUSES
 1. 303 Gap Road, Sunbury $300,000 2. 74 Ballan Road, Werribee $325,000 3. 19 Betula Street, Doveton $410,000 4. 8 Simpson Drive, Dandenong North $505,000 5. 13 Brolga Avenue, Chelsea Heights $533,000 TOP 5 APARTMENTS
 1. 2/20 Kerry Parade, Mont Albert North $910,000 2. 3/3 Myrtle Road, Canterbury $837,000 3. 17/135 Brighton Road, Elwood $796,000 4. 215/9 The Arcade, Docklands $590,000 5. 803/8 Marmion Place, Docklands $482,000
Source <a href="/news">REIV</a>
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Slow growth Sunbury, Victoria's cheapest weekend sale

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GUEST OBSERVER
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House price growth eased in September, led by the key Sydney market, which posted its weakest monthly result in two and a half years. Overall, the data are consistent with our view that the housing market is beginning to soften. 
House prices were unchanged in Sydney in September in seasonally adjusted terms, ending a run of 1-2% monthly growth over the past year. This result is in line with the sharp fall in auction clearance rates in Sydney (Figure 1) as demand has eased somewhat and housing supply risen sharply.
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<div class="column">This easing demand is supported by yesterday’s private credit data, which showed a further slowing in growth in investor housing credit. This suggests that APRA’s macro prudential measures (which have seen tighter borrowing conditions and higher interest rates for investors) are having the desired effect of containing investor borrowing and taking some heat out of the market.</div>
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 Meanwhile, Melbourne house prices posted strong growth in September, up 1.2% m/m (seasonally adjusted). It appears that lower auction clearance rates have been slower to impact on house price growth in Melbourne compared with Sydney. But as this trend continues to unfold, we expect to see price growth in Melbourne ease over coming months. 
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Justin Fabo is senior economist, ANZ Research and Daniel Gradwell is economist, ANZ Research. Both can be contacted <a href="https://www.anz.com/corporate/research/" target="_blank">here.</a>
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Sydney house price growth eases: ANZ Research

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The RBA boss Glenn Stevens was again pressed today on housing affordability, especially for younger people, by some school children.
The issue has been asked at Mr Stevens at past House of Representative's economics committee meetings too.
He also noted it "turns out there was a lot more invested in [property] lending than we all knew in the past."
But he told the House of Representative's economics committee it had been good as economic growth was now slowing.
He also noted unemployment was more important than the ratio of investors/owner occupiers when it comes to housing stability.
He told the hearing the board may not be contemplating any further rate cut saying: "We're pretty content where we are now."
He was also asked about the volatility in the Chinese economy, noting there had been a "fabled hard landing that people have been talking about for years."
When asked on home buyer grants, he noted the solution to high property prices was more supply - not money that ends up with sellers.
Overall inflation was contained and it would take a very sharp fall in the dollar to push inflation up, he suggested.
Last month National Bank of Australia increased the value of mortgages on its investor loan book by nearly $30 billion, after reclassifying data it holds for reporting with the Australian Prudential Regulation Authority.
NAB reclassified previously reported data, which boosted the value of NAB's housing investor loans to $93 billion from the $66.6 billion previous notification.
Before the revision, NAB's investor loan mortgage book was around the same size of ANZ's investor loan book, at around $60 billion.
The big four institutions hold a combined $430bn worth of investor loans on their books. CBA holds $128 billion, while Westpac has the largest amount of investor loans, worth around $150 billion, according to APRA's latest figures.
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More invested in lending than we all knew: RBA's Glenn Stevens

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Hervey Bay has gradually absorbed any excess apartment overstock over the last five to six years after a sustained period of oversupply and wavering sales prices, according to Herron Todd White.
Herron Todd White's September Month in Review found currently there is reasonable demand for units close to the CBD and beach, with the sales price difference between new and old apartments minimal.
"Onground 1990 two bedroom, one bathroom units may sell for only $20,000 less than a circa 2007 modern two bedroom, two bathroom townhouse in a similar location," the report noted.
"It appears that the demand for onground units appeals to a wider market and is likely to appeal to an older buyer (with many retired residents on the Fraser Coast).
"Most of the older unit stock in original condition predominantly sells from $190,000 up to $230,000. Newer units may typically sell for between $250,000 and $330,000, with higher priced stock above this range selling for $380,000. Buyers in the unit market comprise a mix of investors and owner occupiers, with most units selling within six months of the original listing."
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mick.cee-iDmgDDAmu8

Affordability key to Hervey Bay unit market: Herron Todd White

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Construction in Darwin suburbs remains unabated with incentives to first home buyers and the Real Housing for Growth investment program driving investment, according to Herron Todd White's September Month in Review.
Herron Todd White noted the high construction level of new units the CBD and suburbs Palmerston, Nightcliff, Millner, Coconut Grove and Berrimah have a mix of medium density, large complexes with ground level and two storey semi detached dwellings.
"The big shift in the unit market has been seen in the rental market. For the year to June 2015 in the inner Darwin sector,one bedroom units have reduced 9.5%, two bedroom units have reduced 12.5% and three bedroom units have reduced 16.5%," the report highlighted.
"This has certainly been a welcome relief to all tenants in the market, swinging the pendulum back to the tenant after a number of years in the landlord’s corner."
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Incentives driving Darwin property investment: Herron Todd White

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Policies seeking to increase home buyers’ purchasing power when supply is insufficient will serve only to drive up prices and reduce housing affordability, according to the Australian Bankers Association Inc (ABA).
"The buying power of most home purchasers is determined ultimately by the amount of money they can borrow. 
"The average loan size is now $357,500 or 8.7%higher over the past year, and not surprisingly the highest on record."
Finance providers are maintaining high lending standards, claimed ABA in the submission to the House of Representatives Standing Committee on Economics.
"The proportion of new loan approvals to high LVR borrowers, i.e. LVRs more than 90% has fallen since 2009 for all borrowers and remains below 10% for investor loans.
"Low doc loans have fallen to very low levels for both owner-occupiers and investors. The proportion of interest only loans has been gradually rising since 2009, with investors showing a greater propensity to use this form of financing compared with owner-occupiers. The share of housing loans which are impaired has been falling since 2011." 
Australia needs to progressively increase its housing stock to shelter its growing population. 
"Over the year ending September 2014 Australia’s population is estimated to have increased by 354,600.Of this, 150,700 was natural increase and 203,900 was net overseas migration. 
"There is a danger that policy prescriptions that seek to address issues in particular markets – such as excess demand in Sydney and Melbourne – but which are applied across the nation may have unintended consequences in other areas of Australia where such issues are less pressing or absent." 
ABA believes that there is significant opportunity for reform in policies to increase land release for housing construction. 
"The supply side of the housing industry is now beginning to lift. Approvals to build new dwellings have been trending up since mid-2012 and over the year to April 2015, 214,000 approvals were issued for the construction of dwellings. 
Building approvals 
"The close relationship between interest rates and housing construction approvals does not mean that interest rates can be used as a policy tool to address issues of housing shortages. 
"Interest rates influence the short term cycles in construction, but do nothing to address the longer term structural imbalance between demand and supply."
In terms of structural issues a persistent complaint is that development is hindered by a shortage of green field sites, reflecting insufficient land release by state governments, and by excessively restrictive council regulations and developer levies. 
"Demographia supports the assertion that higher land prices are a major factor and that a key reason for expensive land is inadequate release of new land for development." 
Around two thirds of households own or are purchasing their home and about one third are renting. Australia’s home ownership rate is around the middle of many of its peers in the Organisation for Economic Co-operation and Development (OECD). 
"More recent data on housing finance commitments suggests that investors are increasing their share of the housing stock. This is not a uniform trend across Australia but is particularly marked in Sydney and to a lesser extent in Melbourne."
Banks are the predominant suppliers of finance for housing in Australia and housing loans comprise the major part of most banks’ assets. 
"Loans outstanding for the purchase and construction of houses total $1.46 trillion. Of this, banks lend $1.35 trillion, with the remainder spread among building societies, credit unions and finance companies. 
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"Housing loans comprise 62 per cent of the total lending assets of banks and about two- thirds are loans to owner-occupiers and the remaining third to investors. 
"Over the past two years or so the growth rate [of borrowing for housing] has gradually accelerated and has now reached 7.2 per cent over the year ending April 2015. 
"The growth rate over recent months has been the highest since late 2010, but it is well below the average rate of growth in the pre GFC era. The last historical high point was in March 2004 at almost 22 per cent."
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Interest rates on home loans are at multi-generational lows. The average advertised standard variable mortgage rate was 5.45 per cent in May 2015, the lowest since 1968. 
"Today’s discounted rate is even lower at less than 5 per cent. These low rates compare to the 17 per cent peak recorded between June 1989 and March 1990.
"These low rates charged to home borrowers are in part a reflection of the intense competitive environment faced by bank and non-bank lenders. Mostly however, they are a product of the globally low interest rate environment. The RBA’s cash rate was reduced to 2.00 per cent in May 2015 - the lowest in a generation. 
"Interest rates on fixed rate loans are also very low at below 5 per cent. The proportion of loans which are fixed rate is now falling. Around 10 per cent of new loans are fixed rate, which is about half the proportion in 2013. 
"Household finances are in good shape. Dwellings are the single largest component of household wealth at $5.1 trillion, with superannuation at $1.9 trillion. 
"The ratio of housing debt-to-housing assets is around 28 per cent, with every $1 of debt being matched by over $3 in house value."
Although households are increasing their borrowings for housing, they are also prepaying their loans to a greater degree. As a result of this, households are now on average the equivalent of 28 months, or more than two years, ahead on their mortgage repayments 
A change in the mix of property taxes away from stamp duty, and with greater emphasis on land tax would likely improve turnover in the housing market, improving the efficiency of the use of the existing stock of housing
The ABA supports the recommendation of the Committee (recommendation 9.70) that Treasury should prepare and publish a study on the influence of negative gearing on the housing market.
ABA also believes there is not enough evidence to support that current CGT arrangements combined with negative gearing encourage speculative investment as deductions are made at the taxpayers’ marginal tax rate, but gains are taxed at half of that rate. 
"Removal of stamp duty on housing transactions would simplify taxation arrangements. It would improve efficiency by increasing the level of beneficial transactions and by improving the allocation of resources. 
"Abolishing stamp duty would result in a more efficient allocation of housing, as it would no longer act as a barrier to downsizing or moving to a more suitable property. It would also cease to act as a barrier to workers seeking to move for better employment opportunities. 
"An abolition of stamp duty would be expected to result in an increase in property values, particularly in an environment of constrained supply. 
"For banks this would improve (reduce) the LVRs of existing borrowers, with a concomitant reduction in the riskiness of the existing housing book. It would lift the effective available deposits for new borrowers although the effect of this on improved housing affordability may be offset by higher purchase prices. 
"Land tax is a more efficient form of property tax than stamp duties, particularly when it is broad-based. 
"Broadening the scope of land taxes provides an opportunity to lower the rate of tax. 
The revenue implications of changing the rate of land tax vary markedly depending on its scope. 
"The only argument in favour of higher rates of land tax is to increase government revenue. Due to the low excess burden of land tax, changing the rate of land tax to increase government revenue would be one of the least distortional methods to boost receipts. 
"However, a change in rate by itself does not address the issues of complexity or fairness."
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Finance providers maintaining high lending standards: ABA

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There continues to be a yawning divide between the facts on housing affordability and media coverage claiming a crisis.
Yawning is an appropriate word, because journalistic insistence on declaring the Great Australian Dream dead in the face of all the evidence has become boring.
According the latest research on the subject, property in Australia is more affordable than it was 12 months ago – with the exception of one state (no prizes for guessing which one) .
Across Australia, affordability improved in the June Quarter from 30.9% of household income devoted to mortgage payment to 30.3%, according to a new report from the Real Estate Institute of Australia and Adelaide Bank.
The exception to a general picture of improving affordability was New South Wales, where households used 35.6% of their income to meet their mortgage repayments in the June 2015 quarter, compared to 35.3% in the June 2014 quarter.
Last month, the other major research into housing affordability – the Housing Affordability Index from the HIA – also found that affordability has been improving around Australia, with Sydney as the obvious exception.
Media generally manages to ignore that reality and run headlines like “Are foreign investors destroying the first home buyer market?” and articles like a recent one published recently by the Herald Sun which is a serious candidate for our annual Worst Article of the Year award. 
A “journalist” declared in the Herald Sun that “the Great Australian Dream of a house in the suburbs has become an unaffordable nightmare” and justified this by quoting the price of the most expensive houses in a range of suburbs – not the median price, but the dearest. 
The writer noted there was a house for sale in Doncaster asking $3.5 million and used that to support this declaration: “What hope will our kids have?” The article went downhill from there. 
That’s the reality of mainstream media in modern Australia. There are favoured story lines and publications will pursue them with little regard for the facts.
Back in the real world, the new research on affordability shows that the Northern Territory experienced the biggest gain in affordability, with the share of income needed to meet mortgage repayments falling 2.8 percentage points, from 26.6% to 24.9%. 
Western Australia improved from 26.6% to 24.4% and Tasmania from 25% to 22.9%. South Australian mortgagees had a saving of 1.6 points, from 27.1% to 25.5%, while Queensland improved from 28.1% to 27.3%, the ACT from 19.8% to 19.5% and Victoria from 32.2% to 32.1%.
Those hard statistics add to the growing pile of evidence that concerns about price booms, bubbles and out-of-control markets are overblown and wide of the mark.
It has promoted Domain Group senior economist Dr Andrew Wilson – one of the few economists in the land who has a grasp on property issues – to call on Australia’s prudential banking regulator to prove that the country's housing market really does need fixing
Wilson questioned the basis for restrictions to investor lending, saying that APRA had not provided detailed modeling to show why it believed the investor market was overheated.
“Where's the heat? I don't understand where the heat is,” he said. “We have the lowest level of mortgage defaults we've seen. Affordability is still below average levels.”
Wilson said Australian markets have a historical reputation for “orderly growth and correction phases”. He who noted that the one heated market, Sydney, was starting to cool as part of that natural process.
“This is the nature of our housing markets and we're very fortunate that we have those in-built stabilisers in our housing market. I think once we see policymakers interfere in that process, the downstream consequences are really problematic."
Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a>
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Yawning divide between the facts on housing affordability: Terry Ryder

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GUEST OBSERVER
The Westpac –Melbourne Institute Consumer Sentiment Index fell by 5.6% in September from 99.5 in August to 93.9 in September. 
This solid fall in the Index comes as no surprise. We were somewhat puzzled by the surprise increase in the Index last month of 7.8% and there was always likely to be some correction this month. Of course the deluge of disturbing news around violent gyrations in both Australian and overseas equity markets; poor economic data from China; a disappointing report on Australia’s growth rate and the weakness in the Australian dollar were also likely to have unnerved households.
This print on the Index now marks the 17th out of the last 19 months that the Index has been below 100. A level of the Index below 100 indicates that pessimists outnumber optimists. After acknowledging some volatility in the series the underlying picture is that confidence has been little changed over the last year – firmly stuck below 100 and averaging around 96.
For the September survey we also ask respondents about the news items they most recall. This provides an objective test of our assumptions around the factors driving the movements in the Index. For this survey the most recalled news items were around domestic economic conditions overseas issues. Nearly 42% of respondents recalled overseas news items – the second highest proportion on records back to 1975. The highest proportion came in December 2011 (55%) when the European financial crisis was dominating headlines. Domestic economic conditions (54%) were also important this month. Respondents were significantly more negative around domestic conditions than in June.
News on the Australian dollar was noted by 15.5% of respondents – the highest on the dollar since June 2002.
The government would be pleased to see that ‘Budget and taxation’ caught the attention of only 23.1% of respondents compared to 62.7% in September last year.
This heightened concern around the world economy unnerved respondents about the labour market. Almost all respondents who recalled news items about the jobs market noted that the news was unfavourable. There was a sharp 5.8% increase in the Westpac– Melbourne Institute Index of Unemployment Expectations (a higher print indicates heightened employment concerns). The Index is now at its highest read since December 2014.
Most of the components of the Westpac-Melbourne Institute Consumer Sentiment Index fell in September. Households responded negatively around their own finances. The sub-index tracking assessments of ‘family finances vs a year ago’ fell by 5.7%, while that tracking expectations for ‘family finances over the next 12 months’ fell by 1.1%. Nevertheless, both of these components is comfortably higher relative to September last year (7.6% and 8.7% respectively). The volatile sub-index tracking expectations for ‘economic conditions over the next 12 months’ fell by 11.2% (down 11.5% over the year) while the sub-index tracking expectations for ‘economic conditions over the next five years’ increased by 6.2%.
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However, the biggest move came from the sub-index tracking assessments of ‘time to buy a major household item’ which fell by 13.5% to be down by 13.3% over the year. While the fall in the ‘finances’ components would explain part of this fall the near 5% drop in the Australian dollar since the last survey may have discouraged purchasers who will now be expecting higher import prices.
Confidence around the housing market continues to erode. The ‘time to buy a dwelling’ index fell by 0.9% to be 8.6% down on a year ago and 30% lower than two years ago. The New South Wales Index continues to underperform with a 14% fall this month to be 34% down on a year ago and 55% over the last two years. Within that Index the Sydney component is down by 46% over the last year and has reached its lowest level since the survey began in 1975.
House price expectations are also waning. The Westpac House Price Expectations Index fell from 132.7 in August to 127.3 in September (down by 6.1%). This Index is now down by 17% over the last year although remains well above 100 indicating that more respondents still expect prices to continue to rise.
This month we also asked respondents about their choice of the wisest place for savings. Bank deposits remain the most popular choice at 27% (down from 29.4% in June). However this was lowest proportion registered since September 2009. 
This evidence of lower risk aversion is further highlighted by the lift in real estate as a favoured form of saving. The proportion of those respondents favouring real estate increased from 24.6% in June to 28.2% in September. This represents the highest proportion of respondents favouring real estate since September 2003 – the last time we had an investor-led boom in real estate.
The increase in the proportion favouring real estate is likely to be capturing the improving optimism of investors in the housing market whereas the deteriorating prints on the ‘time to buy a dwelling’ index is probably reflecting affordability concerns of upgraders and first home buyers. In that regard note that the Westpac – Melbourne Institute Index of House Price Expectations continues to point to rising prices, albeit at a slower pace.
The Reserve Bank Board next meets on October 6. We expect the Board will maintain its steady rates policy for the remainder of this year and throughout 2016.
The key to any decision to further cut rates, as expected by the financial markets, will be whether the Bank’s current forecast that the unemployment rate can stabilise around current levels proves sustainable. Despite soft economic growth, jobs growth has been strong over the past year partly because of the strong contribution to jobs from the improving export services sectors. A sustained deterioration in the jobs market will not be apparent until next year complicating the market’s expectations of a rate cut by year’s end.
 
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Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Solid fall in September Consumer Sentiment Index: Westpac's Bill Evans

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GUEST OBSERVER
As mining investment falls, Australia’s growth has needed to rebalance to other sectors of the economy. A key driver of this rebalancing act has been a pick-up in housing construction, motivated by low interest rates and rising housing prices. Dwelling approvals have been at record levels in recent months.
This has been a positive story, as Australia did not build many houses when the mining boom was at its height and had an accumulated housing undersupply. But for how long will it be a positive story? When will we have built enough houses, or potentially too many? These questions have become more pertinent recently, given both the ramp-up in housing construction and a slowdown in population growth.
Answering these questions is tricky. There are good measures of the number of new houses being built (supply), but estimates of housing oversupply or undersupply also rely on growth in the number of households (demand). This is affected by population growth and the number of people in each dwelling, which is poorly measured and a swing factor when there are housing shortages or affordability changes. For example, when housing prices rise, more people live together. In short, the numbers are quite ‘rubbery’.
However, despite the uncertainties, it is clear that the recent ramp-up in housing supply means the cumulative housing deficit is diminishing. Our estimates see the national housing market in balance by 2017. Across the states, Victoria has the highest risk of oversupply, while NSW and Queensland will have undersupplies for some time yet.
The bottom line is: Australia does not currently have an oversupply of housing, but a further jump in approvals could increase the risk of building too many houses. This could affect the house price outlook. It may also make the RBA more cautious about cutting rates further from here, as the costs of cutting further could start to outweigh the benefits.  
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Housing supply is ramping up, while population growth slows 
Housing supply has been ramping up in the past couple of years in Australia (Chart 1). Indeed, a pick-up in housing investment directly contributed 0.4ppts to GDP growth over the year to June 2015, which has been helping to rebalance growth as mining investment falls. 
Leading indicators of construction activity have recently risen to record levels with over 200,000 dwellings approved in the past year. The number of new dwellings approved in H1 2015 was 40% higher than in H1 2013. As building approvals typically lead dwelling completions by around 1-3 quarters, the current high level of approvals implies that some further ramp-up in construction is likely in coming quarters. We expect housing construction to continue to be a support for GDP growth in 2016. 
However, the ramp-up in housing investment has come at a time when population growth is slowing. The latest estimates show that population growth slowed to 1.4% in 2014, down from a recent peak of 1.7% in 2012 (Chart 2). The slowdown reflects slower growth in inward migration, with the largest driver of this trend being an increase in the net flow of Kiwis back to New Zealand. 
At first glance, these contrasting trends may seem worrisome. If housing supply is ramping up at the same time that demand is weakening, surely there could be excess supply in the market at some point? However, the story is more complex than this. Much of the recent ramp-up has been needed to work off an accumulated implicit undersupply of dwellings that occurred over the past decade. 
Australia has an accumulated housing undersupply 
Measuring the extent of undersupply in the housing market is, however, also quite tricky. This is partly because there is no literal housing shortage. Instead, the number of people per household adjusts to keep demand in line with supply. For example, when there is insufficient supply of housing at a reasonable price, young people may choose to live in their family home for longer. 
This pattern has been apparent in recent years with population growth exceeding the rate of growth in new households between the 2006 and 2011 censuses (Chart 3). Over that period, the average number of people per household levelled out, rather than falling in line with the historical trend. Importantly, small variations in the number of people per household can make a big difference to estimates of growth in the number of households (which drives housing demand). Measuring housing demand is further complicated by the fact that data on the number of people per household are only available on a five-year basis. 
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‘Underlying’ demand, therefore, has to be estimated, usually based on historical trends. To do this, we have used different scenarios for the number of people per household (Chart 4). In all cases, however, growth in the number of households has exceeded growth in the number of dwellings on average over the past 15 years (particularly between 2007 and 2010). So, on average, we have an accumulated implicit housing undersupply because in previous years we had built too few houses to meet new housing demand at a constant household size. 
When will the housing undersupply be worked off? 
Although there is significant uncertainty in these estimates, it is likely that we are now working off some of the undersupply that had previously built up. This is because dwelling construction is quite clearly growing faster than population growth. Our central estimates show that the housing undersupply probably peaked in 2012 at around 200,000 dwellings and has been falling since then (Chart 5). 
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Just how quickly we will work off the housing undersupply will depend on a number of factors, including how many dwellings are built from here, how much population growth slows and, of course, how many people there are per household. 
In Chart 5, we set out three scenarios based on varying rates of growth in the number of households and all assuming that dwelling construction continues at its current level, with completions running at around 220,000 dwellings (net of 15% for demolitions and un-occupied dwellings). In the central case, with household growth of 1.4% a year this sees the undersupply of housing worked off by 2017. 
Supply imbalances differ across the states 
Although there has been a lift in residential construction in most states recently, there have been stark differences in housing supply and demand dynamics over the past decade (Charts 6 and 7). 
Victoria and New South Wales (NSW) have experienced similar levels of population growth since around 2007; however, in Victoria, construction has kept pace with the increase in the population, while in NSW it has not (Charts 8 and 9). Since the beginning of 2007, the population of NSW has grown by an estimated 813,000 people. In Victoria, the increase was almost identical at 815,000 people. However, over that time, NSW has added 214,000 dwellings, while Victoria added 307,000.
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These disparities across the states mean the national story of a housing shortfall does not apply evenly. Our estimates show significant shortfalls seem likely in NSW and Queensland. In contrast, Victoria, South Australia and Western Australia appear to be much closer to balance. These trends in housing demand and supply are no doubt contributing to the strong growth in housing prices in Sydney and weaker housing price growth elsewhere (Chart 10). 
Looking forward, housing construction has been lifting in all states and recent building approvals suggest further growth to come. In Queensland and Western Australia, there has also been a sharp slowdown in population growth. These factors combined point to a rapid improvement in the level of the housing stock relative to demand. In NSW, a significant upswing in housing construction is underway, and population growth appears to be slowing modestly. However, the accumulated housing deficit appears to have been largest in NSW, so adjustment may take some time yet. In Victoria, as discussed above, housing construction appears to have kept pace with population over recent years. Slower population growth and even stronger construction poses the risk that certain parts of the market may become oversupplied. 
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<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">P</a>aul Bloxham is chief economist (ANZ) for HSBC . Daniel Smith is economist. They can be contacted <a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">here</a>.
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